S&P: Award Winning Buys

06/06/2003 12:00 am EST

Focus:

Fourteen
of Standard & Poor’s equity analysts were included in the 11th annual
Wall Street Journal ‘Best on the Street’ analysts survey. Of these
award-winning S&P analysts, five placed first in their industries. The
firm’s excellent newsletter,The
Outlook, covers the
current favorite stocks chosen by each of the firm’s first-place
honorees.

"Analyst Herman Saftlas
selects AstraZeneca (AZN NYSE), a major UK-based pharmaceutical company
has a solid lineup of new drugs. AstraZeneca is replacing its older, off-patent
drug portfolio with a group of potential blockbusters. These include Nexium,
which is used to treat heartburn symptoms and erosion of the esophagus caused by
acid reflux. The FDA recently approved Iressa, a once-a-day pill that shrinks
tumors and causes fewer side effects than conventional chemotherapy. We expect
earnings to decline 7% this year. However, we estimate that per-share earnings
growth could average 20% a year from 2004 to 2007 fueled by new products. The
shares are selling at about a 15% discount to their intrinsic worth and merit
accumulation.

"Analyst Robert Friedman
selects Boeing (BA NYSE). Investors have fled the shares of
this aerospace giant in droves. However, at current price levels, we believe
the stock is oversold. This year, for the first time in Boeing’s 86-year
history, the company’s commercial jet-manufacturing segment will account for less
than 50% of revenues. For all of 2003, we expect Boeing’s military weapons segment
to account for more than 52% of sales and for the lion’s share of our
$3.12 per-share free cash flow estimate. In spite of this shift, most investors
still seem to view Boeing primarily as a passenger-jet maker. We disagree. Our free
cash flow model suggests the stock is worth $38 to $43 a share. We believe that
the stock merits a strong buy recommendation.

"First Data Corp. (FDC NYSE) is the top choice of analyst Scott
Kessler. "This provider of data processing services to credit and debit
card issuers, as well as merchants, also operates Western Union, the world’s
biggest non-bank money transfer business in terms of sales. Growth continues to
be spurred by Western Union’s international operations, reflecting new locations
as well as higher revenues from existing agents in fast-growing countries like
China and India. Two recent developments should also help the company. In April,
First Data announced the proposed acquisition of competitor Concord EFS in an
all-stock transaction that we believe would bolster the company’s competitive
position. Also, Visa and MasterCard settled a multi-billion-dollar lawsuit that
will allow First Data to collect more in related fees. Trading about 19% below
our estimate of their intrinsic value, based on discounted cash flow analysis,
the shares are well suited for investors seeking capital
appreciation.

"Flextronics International (FLEX NASDAQ) is the favorite of analyst Richard
Stice. "Flextronics, the largest electronics manufacturing services
provider, has been working to expand its offerings beyond the telecom area and
to attract customers from other industries. The company is also continuing to
reduce costs, in part by shifting the production of goods to low-cost regions
like Asia, Eastern Europe, and Latin America. In fact, the company now generates
about two-thirds of its revenues from these locations. At 26 times our fiscal
2004 earnings estimate of $0.38 per share, the stock sells at a discount to the
S&P 500 on a p/e-to growth basis. Moreover, the company’s price-to-sales
ratio is below that of its peers and its own historical average. Given
Flextronics’ attractive market position, favorable industry trends and an
appealing valuation, we recommend purchase.

Analyst Stewart Scharf
says, "Pall Corp. (PLL NYSE) is a global provider of filters for the
healthcare, aerospace, and industrial markets. The firm should benefit mainly from
strength in biopharmaceuticals, as blood filter sales pick up. It should also
benefit from growth in the food and beverage industries. In addition, we see
a gradual global rebound in microelectronics. In 2002, the company acquired the
filtration and separations group of Vivendi’s US Filter unit. We believe this
will lead to significant cost cutting in fiscal 2003 and 2004. We also see cash
being used for share buybacks. The stock trades at 18 times our fiscal 2003
estimate of $1.10, a modest premium to the projected multiples for the S&P
500 and Pall’s peers. We expect 14% earnings per share growth in fiscal 2004. We
believe the shares are attractive for aggressive
investors."